Capital Allowances Act 2001

Disposal values

420 Meaning of “disposal receipt”

In sections 417 to 419 “disposal receipt” means a disposal value that a person is required to bring into account in accordance with—

(a) sections 421 to 425, or

(b) paragraph 11 of Schedule 12 to FA 1997 (finance lease or loan: receipt of major lump sum) or any other enactment.

421 Disposal of, or ceasing to use, asset

(1) This section applies if—

(a) a person has incurred qualifying expenditure on providing assets (including the construction of works), and

(b) any of those assets—

(i) is disposed of, or

(ii) permanently ceases to be used by him for the purposes of a mineral extraction trade (whether because of the discontinuance of the trade or for any other reason).

(2) The person is required to bring the disposal value of the asset into account for the chargeable period in which the disposal or cessation occurs.

422 Use of asset otherwise than for permitted development etc.

(1) This section applies if—

(a) a person has acquired a mineral asset,

(b) at any time after the acquisition, the asset begins to be used (by him or another person) in a way which constitutes development, and

(c) the development is not—

(i) existing permitted development, or

(ii) development for the purposes of a mineral extraction trade carried on by the person.

(2) The person is required to bring the disposal value of the mineral asset into account for the chargeable period in which the use begins.

(3) Development is existing permitted development if at the time of the acquisition—

(a) it has been, or had begun to be, lawfully carried out, or

(b) it could be lawfully carried out under planning permission granted by a general development order.

(4) In applying subsection (3) in relation to land outside the United Kingdom—

(a) whether, at the time of the acquisition, development has been, or had begun to be, lawfully carried out is to be determined according to the law of the territory in which the land is situated, and

(b) whether, at that time, development could be lawfully carried out under planning permission granted by a general development order is to be determined as if the land were in England.

423 Sections 421 and 422: amount of disposal value to be brought into account

(1) The disposal value to be brought into account under section 421 or 422 depends on the event requiring it to be brought into account, as shown in the Table—

Table

Disposal value for sections 421 and 422

1. Event	2. Disposal value
1. Sale of the asset, except in a case where item 2 applies.	The net proceeds of the sale, together with— (a) any insurance money received in respect of the asset as a result of an event affecting the price obtainable on the sale, and (b) any other compensation of any description so received, so far as it consists of capital sums.
2. Sale of the asset where— (a) the sale is at less than market value, (b) there is no charge to tax under Schedule E, and (c) the condition in subsection (3) is met by the buyer.	The market value of the asset at the time of the sale.
3. Demolition or destruction of the asset.	The net amount received for the remains of the asset, together with— (a) any insurance money received in respect of the demolition or destruction, and (b) any other compensation of any description so received, so far as it consists of capital sums.
4. Permanent loss of the asset otherwise than as a result of its demolition or destruction.	Any insurance money received in respect of the loss and, so far as it consists of capital sums, any other compensation of any description so received.
5. Permanent discontinuance of the trade followed by the occurrence of an event within any of items 1 to 4.	The disposal value for the item in question.
6. Any event not falling within any of items 1 to 5.	The market value of the asset at the time of the event.

(2) The amounts referred to in column 2 of the Table are those received by the person required to bring the disposal value into account.

(3) The condition referred to in item 2 of the Table is met by the buyer if—

(a) the buyer’s expenditure on the acquisition of the asset cannot be qualifying expenditure under Part 2 or 6 (plant and machinery and research and development allowances), or

(b) the buyer is a dual resident investing company which is connected with the seller.

424 Disposal value restricted in case of interest in land

(1) If the asset in relation to which a disposal value is required to be brought into account under section 421 or 422 is an interest in land, the disposal value is restricted by excluding the undeveloped market value of the interest.

(2) “The undeveloped market value of the interest” means the amount that, at the time of the disposal, the interest might reasonably be expected to fetch on a sale in the open market on the assumptions in subsection (3).

(3) The assumptions are that—

(a) there is no source of mineral deposits on or in the land, and

(b) it will only ever be lawful to carry out existing permitted development.

(4) Development is existing permitted development if at the time of the disposal—

(a) it has been, or had begun to be, lawfully carried out, or

(b) it could be lawfully carried out under planning permission granted by a general development order.

(5) In applying subsection (4) in relation to land outside the United Kingdom—

(a) whether, at the time of the disposal, development has been, or had begun to be, lawfully carried out is to be determined according to the law of the territory in which the land is situated, and

(b) whether, at that time, development could be lawfully carried out under planning permission granted by a general development order is to be determined as if the land were in England.

425 Receipt of capital sum

(1) This section applies if a person—

(a) has incurred qualifying expenditure, and

(b) receives a capital sum which, in whole or in part, it is reasonable to attribute to that expenditure.

(2) The person is required to bring into account as a disposal value for the chargeable period in which the capital sum is received so much of the capital sum as is reasonably attributable to the qualifying expenditure.

(3) This section does not apply if the capital sum falls to be brought into account under section 421 or 422.